Romney Touts Simpson-Bowles — Doesn’t Totally Mean It

David Cote, chief executive officer of Honeywell International Inc., right, talks to Alan Simpson, co-chairman of President Obama's deficit commission, left, and Erskine Bowles, fellow co-chairman of the deficit commission, in Washington.

Republican Mitt Romney has talked before, as he did this week, about Simpson and Bowles.

They were the co-chairmen of the deficit commission that President Barack Obama appointed, the co-chairmen who issued their own set of recommendations for lack of a super-majority consensus of the commission — a plan promptly shelved.

As Obama prepared to campaign for re-election in Iowa today with his plan to tax the wealthiest Americans and spare the middle class, Romney — who campaigned in Colorado today– gave an interview on Radio Iowa yesterday about extending Bush-era tax cuts for all.

“I’ve already laid out my plan, which is that we should have an extension of the current tax code over a sufficiently long period for us to put in place a restructuring of our entire tax code, to bring down the rates in the country, at the same time to limit some exemptions for people at the high end, so we keep our code progressive,” Romney said on Radio Iowa.

“Remember the Simpson-Bowles commission?” he asked. “It laid out a plan to do just what I described, to get the rates down but to keep the revenue for the government strong — and that’s the place that I would go.”

Except he wouldn’t go all the way.

The plan advanced by Alan Simpson, a retired Republican senator from Wyoming, and Erskine Bowles, a onetime chief of staff for President Bill Clinton from North Carolina, would have increased tax revenue by $1 trillion by 2010 by scaling back or eliminating hundreds of tax deductions, exclusions or credits such as those allowing homeowners to write off interest paid on their mortgages. It would have cut Social Security benefits and reduced discretionary spending by $1.6 trillion and pared Medicare by $400 billion.

It would have lowered individual and corporate tax rates, while near-doubling federal gasoline taxes by 15 cents per gallon. And it would have taxed capital gains as ordinary income — hardly appealing to a presidential candidate whose own effective 14 percent tax rate is a product of his significant income from capital gains. (Romney has said he parts ways with Simpson and Bowles on capital gains.)

Overall, that plan would have taken $4 trillion out of the nation’s debt over 10 years, with one third of that coming from revenue increases.

Romney has not accepted all of this. While talking about curtailing exemptions — yet refraining from saying which ones and by how much — he is not proposing to raise taxes.

Making matters more complicated, the 20 percent reduction in individual income tax rates Romney proposes cannot easily be offset by curtailing or eliminating many popular tax breaks, according to a nonpartisan study by the Tax Policy Center in Washington today.

Romney would need to eliminate $320 billion in tax breaks, or 30 percent of the total, to pay for his proposed 20 percent reduction in tax rates, as Bloomberg’s Richard Rubin reports on the study. Taking tax breaks for retirement savings, capital gains and employer-provided health insurance off the table would make the task more difficult, according to the study.

“It is possible to maintain revenues in the face of large marginal tax rate cuts by paring back tax expenditures, but it would be very difficult,” the study concludes. “The task becomes much harder if another objective is to maintain the progressivity of the federal income tax.”